ADU: Definition, Types, Benefits, & Regulations [2024]

Looking for ways to make the most of your property? Then an ADU can be the best choice for you! 

These tiny houses offer additional living space for family members, guests or for rental income. You just need to find the right fit ADU type for your property to address your housing needs!

However, you may find it a little confusing to make an informed decision with many design options and complex regulations to consider. Hence, we are here with a comprehensive guide on the ABCs of ADUs to assist you.

Today, we will discuss,

• Accessory Dwelling Units or ADUs and their types
• ADU advantages and disadvantages for their homeowners
• Important regulations that you need to know.

Let’s begin. 

What is ADU?

An ADU, aka Accessory Dwelling Unit, is a secondary unit built within your home or property. It can be a totally separate building or attached to your main house. 

You can create it as a basement apartment in your home. It can also be built above your garage. However, it does not matter specifically where the ADU is located or what things it contains. 

What matters is that it’s part of your property and can offer you additional living spaces or rental income. 

What are The Types of ADU? 

The accessory dwelling units come in different shapes and sizes. However, they can be categorized into the following types. 

Detached ADUs

Detached ADUs are totally separated from the main single-family home. It is generally built in the backyard of the primary dwelling home and serves as a rental housing, mother-in-law suite, or guest cottage. 

This type of ADU is the best option for rentals because it offers the most privacy among any other ADU type. 

However, the backyard cottage can also be the most expensive to build out. Detached ADUs are essentially tiny houses and you have to build the whole thing from the top. 

In most cases, these ADUs may even require independent utility for connections.

Attached ADUs

Often called a granny flat, the attached ADUs are like an addition to your residential units. It can be a second story over the garage or can be an extra room on the main floor. 

Attached ADUs generally share the same wall of your home, offering a close connection with your space. These ADUs can provide privacy but not as much as the detached ones. 

However, building an attached ADU can be a budget-friendly option. 

Garage Conversion

Here, you transform the existing garage into a living space. You may add essential features like heating and cooling systems and proper insulation. 

Garage conversion also includes connecting utilities like water for a bathroom and kitchen area. 

You can create comfortable living options with this conversion and make a rental income. 

Interior Conversion

In the interior conversion, you just turn your home’s existing space into a separate living space. For instance, it can be an attic or basement. 

These tiny houses generally have an exterior entrance separating them from the main house. However, that may not always be the case, depending on your intended use. 

It’s a sustainable ADU option, like renovating your main house! 

Junior Accessory Dwelling Unit

A junior ADU is a smaller version of the traditional accessory dwelling unit. Unlike the other ADU types, the junior ADU or JADU must have a separate entrance. 

However, it can share the kitchen and bathroom facility of the main dwelling house. You can create additional space for your family members or for rent without any separate space. 

Moreover, junior ADUs use eco-friendly ADU construction materials that make it a sustainable option for homeowners.

Benefits of Adding An ADU to Your Property

ADUs offer financial, multi-generational, and environmental benefits at the same time. Here is why accessory dwelling units can be a wise investment in your property. 

1. Increased Property Value

Think about a newly built granny unit in the backyard of your house. It can be an effortless way to enhance the appeal of your house and the resale value!

Your potential buyer will see your ADUs as an additional property when you want to sell it. Rental income from the ADUs is also very attractive. 

Moreover, homes with ADUs often receive higher appraisals because of the enhancements they offer. 

2. Affordable Housing for family members 

Home prices and rents have heightened during the recent months. In this situation, many young adults choose to live with their parents. 

In this case, a backyard can offer an affordable housing solution. It can provide privacy to the family members while keeping them close. 

The same goes for the aging parents who live in the ADUs in the children’s housing. The ADUs can also offer a great place of living for caregivers or nannies. 

3. Land Conservation

With an accessory dwelling unit in your house, you can create another home without requiring any more land. 

As the ADUs are smaller than the traditional houses, they can be the most sustainable housing option for the many people out there. 

Moreover, the ADUs align with the urban infill development where it focuses on using the existing space of the cities.

4. Offer Greater Independence

As for independence, detached ADUs give the residents more personal space than the attached ones. 

The renters and the caregivers feel like their own home and enjoy privacy. Moreover, the ADUs support multi-generational living. It enables the families to stay connected while respecting each other’s privacy. 

5. Gain Tax Benefits 

Homeowners can get tax benefits from the ADUs as they deduct the costs over time. You can even speed up the deduction process to enjoy the benefits sooner. 

Let’s say you are using the accessory dwelling unit for rentals or as offices. That can mean that you can deduct the expenses related to the construction and maintenance. It will make it easier for you to save money in the future.

Disadvantages of Accessory Dwelling Unit

Well, everything in this world has its own disadvantages. The ADUs are also no exception. Below are some drawbacks of it that you may experience. 

• Will require maintenance

The accessory apartments require ongoing and continuous maintenance. It can add up your monthly expenses for the upkeep and repairs. 

• Added monthly expenses

These backyard cottages also increase the monthly utility bills and insurance premiums. Moreover, sometimes, it can bring additional property management costs. 

• May take up space

The ADUs can impact yard size. So, space consideration may be required if the outdoor space of your house is important to you.

Navigating The ADU Building Process In California 

An accessory dwelling unit can be a great way to add value to your property. However, building the ADUs in California can feel a little complex with the zoning laws and permit regulations. 

Below we have discussed it in a simple way to have a quick overview. 

• California has specific zoning laws. So, first, you need to verify your local ADU zoning district regulations for your property. 
• You will need to get all the necessary permits. It may include permits for building, electrical, and plumbing to ensure law units. It may be easier to get the permits due to California’s state laws. However, local approvals can vary.
• Now, make plans for your ADU design. Ensure that the ADU design follows all the size, height, and safety requirements of California. 
• The next step involves preparing your site and setting the foundation of your ADU. Once the foundation is in place, the framework for the ADU will begin. It means building the basic frame of your house either by steel or wood. 
• Set up the utilities and infrastructure like water, sewer, and electricity connections for the ADU. It is essential as ADUs require their own utilities. 
• Ensure the ADU meets the energy efficiency standards of the California code requirements. 
• Lastly, your ADU must pass a final inspection after it’s built. It is an essential step to ensure your ADU meets all the safety and building codes of California.

Well, we understand each step can feel complex. However, with the help of experts like All American Modular, you can make the whole process very easy. Their expert team can handle everything from permit application to the final process in California. They can help you to ensure that your ADU meets all the California guidelines. 

How Much Does It Cost to Build ADU In California?

In general, you may expect to spend around $200,000 to $400,000 to build an accessory dwelling unit in California. However, keep in mind that these costs can vary depending on various factors. Such as

• The ADU project, 
• The design and size of the ADU, 
• Your location, and others. 

However, you can divide the total cost into soft costs and hard costs involved in building an ADU.

Minor Costs Involved in Building An ADU

The soft cost for building an ADU can take up to 10% – 15% of the total project cost. These costs include:

Minor Costs Involved in Building ADU	Estimated Costs
Design and planning	$20,000-$30,000
Consultation	$8,000 and $12,000
Permits and fees	Building permits: $2,000 to $10,000City fees: $3,000 to $11,000

Major Costs Involved in Building An ADU

Hard costs for building an ADU can take the remaining 85%-90% of the total cost. They generally include- 

Site Preparation Cost

These expenses vary depending on the condition of the property. Issues like rocks, pipes, or wires under the ground can raise the requirements. However, below is a rough idea of typical site preparation costs. 

For excavation	$50-$200 per cubic yard
For concrete foundations	$4,200 – $13,200
For a concrete slab	$4-$8 per square foot
For retaining walls	$3,200-$9,000

Construction Cost

It is the highest accessory dwelling unit construction cost. You may expect to spend $200,000-$300,000 to build an ADU of 400-600 square footage. 

Utilities & Interior Cost

You must follow the building rules for utilities like plumbing, electrical, and HVAC systems. For the interior design, you may need to spend $10-$60 for every square foot. 

How to Finance An ADU House in California

ADU financing often depends on traditional factors like the value of your home, your income, and credit. However, often these traditional options may not cover all the construction costs. 

Fortunately, there are some alternative financing options for building an ADU available in California. It allows you to borrow based on the increased value of your home after adding the ADU. 

Let’s check out some below. 

ADU Home Equity Share Investments 

The agreement allows you to access your home’s value without the complexities of traditional loans. 

Here, you partner with your investor instead of borrowing money. In this agreement, the investor can give you up to $500,000 to fund your ADU. In return, they will take a percentage of your increased home’s value in the future. 

This ADU financing option is best for those who aren’t qualified for the other types of loans. It is also worth considering if you simply want to avoid any extra monthly expenses. 

Cash-out Refinancing 

Cash-out refinancing allows you to get cash by taking out a new mortgage. It is one of the most cost-effective ways to build an ADU. 

This mortgage is generally larger than you currently owe on your home. With this larger mortgage, you can pay off the current one and can use the extra to build your ADU. 

That means you are getting a mortgage for both your home and ADU without any separate loans. 

Cash-out refinancing can be beneficial for you in case you are a homeowner with a lot of equity. You should have at least $200,000 in home equity. Thus, you can comfortably cover the ADU expenses.

ADU Construction Loans or Renovation Loans 

These loans are specifically used to finance renovations or construction projects. You can borrow money based on what your home will be worth after renovation, such as, after ADU construction. 

Many homeowners go for Fannie Mae homestyle renovation loans to fund their ADUs. You can borrow larger amounts with this loan. It makes it easier to cover the cost of building an ADU. 

However, these loans have strict paperwork and processes. So, closing times may be longer. 

Home Equity Loans and Lines of Credit

It allows you to finance your ADU using your home equity. Here, HELOCs work like a credit card. 

You can borrow money when you need it. Moreover, you only pay the interest on the amount you have borrowed. However, the interest rate can change over time.

Unsecured Loans 

Unsecured loans depend on your creditworthiness instead of collateral like property. So, your property will remain safe as you are not offering anything for the security of the loan. 

Moreover, it’s very easy to gain. But remember that they come with higher interest rates and may have lower borrowing limits.

Regulations for ADU in California 

Now, let’s check out the ADU regulations in California to gain a clear understanding. 

ADU Zoning District Laws 

All properties zoned out for single-family, double-family, or multifamily may be used to build the accessory dwelling unit according to the zoning laws for ADUs. 

Setback 

The setback requirement highlights that every ADU must be at least 4 feet away from the property’s back and side boundaries. 

The Number of Units 

How many ADUs you are allowed to build depends on your lot’s zoning.

• You may add one ADU or one junior ADU in single-family zone lots. 
• If you have two-family or multifamily zone lots, you can add up two detached AUDs in each lot. Moreover, if you want to convert existing nonliving spaces, you can add ADUs up to 25% of the existing units of the building. 

Building Size and Height 

The maximum size and height of the accessory dwelling unit depends on its type. For instance, 

Type Of ADU	Maximum Allowable Size
Junior ADUs (JADUs)	500 square feet
Detached ADUs	1,200 square feet
Attached ADUs	Can’t be larger than 50% of the primary home’s floor area.Can be a maximum of up to 1,200 square feet.

As for the height of the ADUs:

• Detached ADUs can be built up to a maximum height of 16 feet. 
• The attached ADU height limit matches the height allowed in the area’s zoning rules. 

Parking 

You typically need to provide one parking space for each ADU. However, there are some exceptions where this requirement can be set aside. For instance, 

• Your accessory dwelling unit is located near public transit. But it should be within half a mile of walking distance. 
• You don’t need to provide a parking lot if your ADU is located in a historically recognized area. 
• Your ADU is located within the primary dwelling unit or another existing structure on the lot. Then you won’t need a separate parking lot. 
• Let’s say you need a permit to park on the street, but that permit is not available for ADU residents. Then you won’t need to provide a parking space. 
• Don’t worry about the parking lot in case there is a car-share vehicle within one block of the ADU. 

Owner occupancy 

You are not required to live in the properties to obtain a permit for an ADU between January 1, 2020, and January 1, 2025. 

It is beneficial for the rental property owners. That’s because it allows them to build and rent out the ADUs. Plus, they don’t even need to live in the residential dwelling unit. 

Rental 

In California, you can rent out the ADU for long-term stays. However, you can’t rent it out for short-term stays. The city has restrictions for the short-term rentals of ADUs. 

Conclusion 

Accessory dwelling units, or ADUs, are smart and effective solutions for housing needs. They provide homeowners with additional living space and help tackle the housing shortage in the community. 

Understand the local regulations and ADU types to make an informed choice. Whether you want to increase your home value or earn money from rentals, make the most of the advantages ADUs offer you! 

FAQs 

What is the $40,000 grant in California for ADUs?

California ADU grants mean that you can get financial assistance for ADUs up to $40,000. It includes the pre-development and closing costs associated with constructing accessory dwelling units. The grants make it easier for homeowners to have additional housing on their property. 

What is the cheapest way to build an ADU in California?

The cheapest way to build an ADU in California is to convert the existing garage into living space. These cost-effective ADU options typically use the existing structure. So the new framing does not require any expenses. 

Does an ADU require a kitchen?

The accessory dwelling units must have space for living, sleeping, eating, and cooking. If a junior accessory dwelling unit or JADU does not share kitchen facilities with the main house, then it should have kitchen facilities. Each unit must fulfill every living requirement. 

Do I need a permit to build a guest house?

Definitely! You will almost always need permits to build ADUs. You know, constructing a guest house is similar to building a smaller house. So, you will need appropriate permits to build a foundation and to install utilities legally.